Real Estate Matters: Parents struggle to pay son’s mortgage

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Q: Our son built a huge new home a few years back. But with the economy industry falling apart, so did his jobs. My husband and I have been making the house payment for our son and his wife for 21/2 years. They owe us about $50,000. We were afraid to allow the house to go into foreclosure, as they had, and still have, some equity. It has been a financial burden. But we couldn’t let our grandchildren wind up on the street.

The house has been listed for sale but has not sold. Our son and his wife are now divorced, although she is on both the mortgage and the title. She is willing to sign a quitclaim deed to my son for her share of the property. Our son wants to put my husband on the title of the house so that in case anything happens to him, the equity will go to his father and not his ex-wife.

We wrote out a promissory agreement for repayment of the money, but only our son signed it, stating that the ex-wife was not responsible for the debt if she quitclaims the house. Is this true?

If the property sells, will they cut a check to repay us? Will my husband be responsible for any additional costs if he is on the title? We don’t know what to do.

A: I’m sorry your son and his family have fallen on hard times. Let’s clear up some of the confusion. When you quitclaim your interest in a piece of real estate to someone else, you still are responsible for the mortgage you signed. The only way you would not be responsible is if you refinanced the property and the original debt was paid off.

Quitclaiming the property to your son is a bad move on the wife’s part. She will no longer own any the property but will still be on the hook for the full amount of the mortgage.

As for adding you or your husband to the title (and we think it should be both of you), that would be fine, although if the house goes into foreclosure there may not be any equity to salvage.

If your son is divorced, he can sign a will designating you or your husband to inherit the home. He could also set up a living trust. Once the home is in the living trust, he could designate you or your husband as the future owners of the home.

Your son owes you and your husband a lot of money. What he and his ex-wife should do is sign a promissory note for the full amount. If the ex-wife won’t sign, then have her quitclaim her interest in the property to your son, and he can sign for the full amount, using the property as collateral. This way, you might be able to get some of the money back when the home is sold.

It’s possible you won’t see this money again. The real issue is how you can stop the drain on your cash flow. Your son needs to figure out whether he is going to be able to afford this property in the near future, and, if not, formulate an exit strategy that includes selling at whatever price necessary.

If you have questions, call Ilyce Glink’s radio show at 800-972-8255 between 10 a.m. and noon any Sunday, or contact her or Samuel Tamkin online at www.thinkglink.com.